"For audits, certified public accountants affiliated with accounting firms registered with the Financial Services Commission (FSC) do the work, and for lawsuits, attorneys affiliated with law firms approved by the Ministry of Justice do the work, so is it acceptable for an appraiser affiliated with KB Kookmin Bank, which is not approved, to conduct appraisals?"
On the 18th, when Seoul's temperature fell below freezing for the first time this fall, about 300 property appraisers gathered in front of the new building of KB Kookmin Bank in Yeouido, Yeongdeungpo District. They held picket signs reading "Immediately stop KB Kookmin Bank's appraisal activities" and "Dismantle the illegal valuation department now." This was already the sixth time they had gathered in front of KB Kookmin Bank, following Sept. 29; Oct. 14 and 27; and Nov. 4 and 12.
The Korea Association of Property Appraisers held the "6th rally condemning KB Kookmin Bank's illegal encroachment on the appraisal market" that day and demanded that KB Kookmin Bank stop in-house appraisals and dismantle its valuation department. Appraisers argue that KB Kookmin Bank is effectively operating an illegal appraisal firm, appraising real estate and issuing collateral loans.
Yang Gil-su, president of the Association of Property Appraisers, said, "We are not taking issue with all of KB Kookmin Bank's collateral value assessments; we are taking issue with the 1% of illegal in-house appraisals performed by directly hiring appraisers," and added, "Even though the financial authorities agreed to form an official consultative body to resolve the issue, the reason members have no choice but to hold rallies every week in the cold wind is that KB Kookmin Bank's behavior shows no sincerity."
The controversy over banks' in-house collateral appraisals, which had long been a "hot potato," began in 2016 when the "Act on the Disclosure of Real Estate Prices and Appraisals" was split in two. The newly enacted Appraisal Act at the time specified a clause stating that "when financial institutions appraise land, etc., in the process of loans or the purchase and sale of an asset, they must entrust the appraisal to an appraisal corporation, etc."
However, the problem is that a lower administrative rule of the Financial Supervisory Service still contains provisions allowing banks' in-house evaluations. Banks argue on this basis that they can conduct in-house assessments for collateral items with clear market prices. According to the Korea Real Estate Board, as of 2022 the proportion of financial institutions' in-house assessments reached 68%.
Then why did the appraisers rush to KB Kookmin Bank? An official at the Association of Property Appraisers said, "We had condoned some in-house evaluations, considering our relationship with the banking sector," but added, "KB Kookmin Bank has created a separate organization called the valuation department and has rapidly expanded its scale by, for example, tripling its staff in just a few years, creating an atmosphere that we can no longer just watch."
According to the Association of Property Appraisers, KB Kookmin Bank's in-house appraisal amounts were 26 trillion won in 2022, 50 trillion won in 2023, and 75 trillion won in 2024, nearly tripling in three years. If the bank had commissioned external appraisal firms, the required fees are estimated at 55 billion won; for KB Kookmin Bank, that is the expense saved, but for the appraisal industry, it can be seen as work taken away.
Although the rift between the appraisal industry and banks is deepening, government ministries remain far apart. The Ministry of Land, Infrastructure and Transport issued an authoritative interpretation in September that KB Kookmin Bank's in-house appraisals violate the law. Even if an enforcement guideline, a lower rule (administrative rule), allowed in-house evaluations, the interpretation is that it violates the law under the principle of the supremacy of statutes.
Unlike the Ministry of Land, Infrastructure and Transport, which views this matter as subject to corrective action rather than negotiation, the financial authorities appear to be focusing on improving the system through consultation. At the comprehensive National Assembly audit of the institutional sector for the financial field by the National Policy Committee last month, in response to related questions, Lee Eog-weon, chair of the Financial Services Commission (FSC), said, "The FSC vice chair and the head of the Association of Property Appraisers recently met and reached a principled agreement on how to improve the assessment methodology," adding, "We expect a reasonable plan to emerge." However, there are reportedly no concrete moves yet.
The banking sector emphasizes that the measure is intended to increase the efficiency of procedures for assessing the value of collateral for loan execution and to reduce expenses. The banking sector argues that if in-house appraisals of collateral are halted, loan interest amounts could rise. Some have suggested a plan to allow customers to choose between commissioning an external appraisal firm or an in-house evaluation, according to their preference. Meanwhile, a four-party consultative body with the Association of Property Appraisers, the Financial Services Commission (FSC), the Financial Supervisory Service, and KB Kookmin Bank is expected to begin final coordination soon.